PURPOSE:
to encourage good governance in tax matters.
BACKGROUND: with the financial crisis, the
need for national governments to safeguard their tax revenues is more acute
than ever. The need to promote international tax cooperation and common
standards has now become a regular item on the agenda of discussions,
both within the EU and in international fora. Most recently, the G20 Leaders
agreed at their summit in London (April 2, 2009), "to take action
against non-cooperative jurisdictions, including tax havens". According to an OECD estimate at the end of 2008, the world's tax
havens have attracted between $5 trillion and $7 trillionin assets,
although the degree of secrecy surrounding these accounts makes it difficult
to determine exactly just how much is located in these individual jurisdictions.
With national budgets and, therefore, social and other policies under severe strain
this is an extremely serious problem.
In the run-up to the G20 meeting, many jurisdictions reacted by
indicating their willingness to apply international standards of transparency
and information exchange from now on.
Accordingly, the EU and its partners have a strong common interest
at this time in promoting tax cooperation and common standards on as wide a
geographical basis as possible. The time is now right for Member States and
third countries to work together and to encourage and support the move that
has now started towards a broader acceptance of international standards of
tax co-operation.
This Communication aims to identify the particular EU contribution
to good governance in the area of direct taxation. It considers:
- how good governance could be improved within the EU,
- the particular tools that the European Community and EU
Member States may have at their disposal to promote good governance
internationally, and
- the scope for more
co-ordinated action by EU Member States, so as to support, streamline
and complement international action taken in other fora such as the OECD
and the UN.
CONTENT: this
Communication presents for consideration a series of steps to promote good
governance in the tax area, entailing action both within and outside the EU
and both at EU and at individual Member State levels.
1) Improve good governance within the EU: the Commission calls
on the Council to adopt as soon as possible the following Commission
proposals:
- a proposal
to replace the current Mutual Assistance Directive. The proposal
would introduce two important new elements that the Commission considers
indispensable to reinforce EU action at international level against tax
fraud and evasion: (i) it would introduce a most favoured nation clause
whereby Member States would be obliged to provide to another Member State
the level of cooperation that they have accepted in relation to a third
country; (ii) the proposal would prohibit Member States from invoking
bank secrecy for non residents as a reason for refusing to supply
information concerning a taxpayer to his or her Member State of residence;
- another proposal
to replace the existing Directive on recovery of tax claims. It aims to increase the efficiency of assistance so as to
enhance tax administrations' capacity to recover unpaid taxes, and thus
contribute to the fight against tax fraud;
- a proposal
to amend the Savings Directive: there is a need to extend the scope
of the Directive to intermediate tax-exempted structures (trust,
foundations…) and to income equivalent to interest obtained through
investments in some innovative financial products;
- to
eliminate harmful business tax measures under the Code of Conduct for
Business Taxation.
2) Promote good governance in the relations with third
countries: the Commission proposes
to improve the particular tools that the European Community and EU Member
States may have at their disposal to promote good governance internationally.
A few of the concrete measures are as follows:
- improve the negotiating
of provisions on good governance in the tax area with third countries
within general agreements;
- in
this context, invite the Council to give the appropriate political
priority to the mandate given to the Commission to include good
governance principles in relevant EU agreements with third countries;
- conclude
specific agreements in the tax area containing, if appropriate, provisions
on transparency and exchange of information for tax purposes at EU
level;
- promote
more cooperation with third countries in the framework of the Savings
Tax Directive;
- as regards the Code of
Conduct for Business Taxation, a coherent policy of coordinated
action toward third countries engaging in harmful business tax practices
should be put in place, such as by adopting a common approach to the
application of anti-abuse measures;
- improve efforts at EU
level to promote good governance in the tax area in third countries
eligible for development aid should be enhanced by the following
actions: (i) monitoring, under the Mid-Term Reviews (MTR) of aid
programmes, the state of play of good governance, so as to be able to
take appropriate measures when relevant; (ii) reallocation of funds towards
countries that are implementing satisfactorily their commitments; and,
conversely, considering a cancellation of funds earmarked for those
countries that did not implement their commitments; (iii) provision of
the necessary technical assistance to help countries to meet their commitments
on good governance in the tax area;
- consider the feasibility
of introducing an additional criterion in the eligibility evaluation for
the allocation of funds under the current external instruments of
the Community that would be linked to the application by third countries
of the principles of good governance in the tax area;
- discuss
with Member States possible counter-measures towards non cooperative
jurisdictions in the tax area (the OECD Secretariat has suggested a list
of measures. These will need to be examined together with the Member States);
- examine the extent of coherence between the principles of
good governance in the tax area and Member States' own tax policies,
including bilateral tax treaties with third countries;
- improve coordination of EU Member States' positions in
discussions at the OECD, G20 and UN on international good governance in
the tax area is necessary to ensure greater leverage in dealings with
non-cooperative countries.
The Commission intends to pursue constructive dialogue with all
stakeholders concerned in connection with the principles and practical
implementation of the measures identified in this Communication, and it will
review and report on the situation in 2010.
The Commission
believes that the momentum that has been generated by the G20 Leaders in pushing
forward international tax cooperation needs to be maintained and declares
that it is ready to assist the Member States in taking forward the
appropriate instructions in the context of the policy on good governance in
the tax area. It invites the Council to adopt these policy orientations and
take action to ensure their swift implementation.